Friday, February 27, 2009

What's the Big Deal?

It occurred to me after making my last post that some people might wonder why we should worry about Obama's plan to increase taxes on "the rich."

"It doesn't affect me," you say, "I'm not rich."

Perhaps not, but you might be surprised to learn just how much we all benefit from other people's wealth--not by their providing us with charitable contributions, but in providing goods and services and opportunities for employment.

The motive for all economic transactions is profit. And while the desire for profit can certainly be abused, it is equally certain that without it, no economic transactions would ever take place.

Those who have excess money (i.e., the rich) are motivated by a desire for greater profit to invest their money in the production of goods and the providing of services that consumers are willing to pay for. The greater the potential for profit, the more people are involved in the venture, and the number of goods and services multiplies. Supply then increases relative to demand and prices drop, benefitting consumers (mostly average Joes like you and me). But when taxes on "the rich" are increased, they have less money to invest in ventures that benefit the rest of us.

Soaking the rich with higher taxes may score political points in an age of envy, but it doesn't make good economic sense.

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